CMS handles more than a trillion dollars in Medicare and Medicaid claims every year. Because not every claim can be scrutinized, statistical sampling is essential for effective oversight of these claims. The current sampling tool, RAT-STATS, was originally designed by the HHS Office of Inspector General (OIG) to give nonexperts a robust method for selecting statistically valid samples. It is the primary statistical tool for OIG’s Office of Audit Services. Although OIG does not require the use of RAT-STATS, many providers download the software and use it in their efforts to fulfill the claims review requirements for corporate integrity agreements or provider self-disclosure protocol.

The OIG has recently announced the launch of the Simple Extensible Sampling Tool Challenge (Challenge) to develop the foundation for an upgraded version of RAT-STATS. According to the OIG, while the current version of RAT-STATS is well validated, its user interface can be difficult to navigate and the underlying code makes the software costly to update. Therefore, the OIG needs a new, modern version of the software that is easy to use and can be extended in a cost-effective manner.

Current RAT-STATS

The RAT-STATS software was originally created in 1978 and has gone through several upgrades since then. Unlike a full statistical package that attempts to answer all types of questions for a wide range of users, RAT-STATS serves as a streamlined solution to handle the specific task of developing valid statistical samples and estimates within the health care oversight setting.

For example, an OIG investigator may pull a simple random sample in order to estimate damages for a provider suspected of fraud. RAT-STATS then generates valid pseudo-random numbers and outputs all of the information needed to replicate the sample. Once the investigator finishes reviewing the sample, he or she can then enter the results into RAT-STATS to get the final statistical estimate. While the investigator may need some basic training in statistics, they do not need the same level of expertise as would be required to navigate the many options available in a full-service statistical or data analysis package.

The Challenge

In order to complete the Challenge participants must create a software package that replicates the operation of four of the functions of the original RAT-STATS software: (1) single stage random numbers;
(2) unrestricted attribute appraisal; (3) unrestricted variable appraisal; and (4) stratified variable appraisal.

Teams of one or more members can participate in this Challenge. Each team must have a captain. Individual team members and team captains must register in accordance with the registration process set forth in the Federal Register notice. The team captain is to serve as the corresponding participant
with OIG about the Challenge and to submit the team’s Challenge entry. While the OIG will notify all registered Challenge participants by email of any amendments to the Challenge, the team captain is expected to keep the team members informed about matters germane to the Challenge.

Submissions must meet all of the 20 rules and requirements outlined in the Federal Register notice. The technical specifications behind the four RAT-STATS functions along with 10 test datasets are available on the OIG website.

The Challenge began on September 28, 2016. The submission period runs from September 28, 2016, to May 15, 2017. The judging period runs from September 28, 2016, to June 15, 2017. A winner will be announced no later than July 1, 2017. The grand prize is $25,000.

Beneficiary and Family Centered Care quality improvement organizations (BFCC-QIOs) are back to performing initial patient status reviews to determine whether short stays qualify for Medicare Part A payment under the Two-Midnight Rule as of September 12, 2016. In May 2016, CMS put the reviews on hold “to promote consistent application of the medical review policies” concerning short stays and to standardize the review process. BFCC-QIOs will once again review short stays in acute care inpatient hospitals, long-term care hospitals, and inpatient psychiatric facilities.

Pursuant to the Two-Midnight Rule, Medicare Part A will provide coverage for inpatient stays not passing two midnights where, at the time of admission, the admitting practitioner expected the patient to be hospitalized over the span of two midnights or where the practitioner believes that inpatient admission is medically necessary despite an expected stay shorter than two midnights. In both situations, the medical record must support that expectation. During the review hiatus, the BFCC-QIOs underwent retraining on the Two-Midnight Rule and completed re-reviews of claims that had been formally denied. They reached out to providers to discuss claims impacted by the suspension and also to educate them on the Two-Midnight policy. CMS also validated BFCC-QIO peer review activities related to the reviews.

More than 2,000 hospitals that received almost $1.5 billion in total settlement money from CMS for fee-for-service denials based on patient status reviews for admissions prior to October 1, 2013, were identified by name, provider number, total claims settled, and amount of money received. The settlement, which was paid in 2015 at 68 percent of the net allowable amount, gave providers a guaranteed timely payment in exchange for withdrawing pending appeals that were tied up waiting through a large administrative hearing backlog. Settled claims numbers ranged from one to almost 3,000, with amounts paid between $0 and almost $16 million.

The settlement was a one-time offer by CMS to alleviate the burdens on the Medicare appeals system. The agency only settled claims for patients admitted prior to October 1, 2013, because it believed that the two-midnight rule, which began on that date, would reduce future appeals volume (see CMS offers partial payments for certain Part A hospital claims under appeal, Health Law Daily, September 3, 2014; CMS pays $1.3B to settle hospital inpatient claims, Health Law Daily, June 15, 2015).

The administrative hearing backlog remains a problem for CMS, which last month proposed regulations to improve the efficiency of the Medicare appeals process and address the increasing number of backlogged appeals waiting for administrative adjudication (Proposed rule, 81 FR 43789, July 5, 2016). The settlement offer was made nine months after Nancy Griswold, Chief Administrative Law Judge for HHS’ Office of Medicare Hearings and Appeals (OMHA), said that there were 375,000 claims waiting for adjudication and suspended new requests for hearings before an administrative law judge. As of April 2016, however, OMHA had over 750,000 pending appeals. The two-midnight rule, which did not have the desired effect of reducing appeals, has also ended after hospital backlash (see 1.5 percent payment cut overshadows end of Two-Midnight, Health Law Daily, August 3, 2016).

Missouri-based Christian Hospital is challenging the way that Medicare calculates penalties for hospital readmissions. With the backing of the Missouri Hospital Association, the hospital asserts that Medicare’s Hospital Readmissions Reduction Program (HRRP) does not adequately account for the socioeconomic status of the patients that a hospital treats. The hospital and the hospital association argue that the methodology unfairly penalizes safety-net hospitals.

HRRP

The HRRP, created by Section 3025 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), requires CMS to reduce payments to Inpatient Prospective Payment System (IPPS) hospitals with excess readmissions. CMS defines readmission as “an admission to a subsection (d) hospital within 30 days of a discharge from the same or another subsection (d) hospital.” CMS was obligated, under the program, to develop a formula to calculate an excessive readmission ratio based upon a national average of hospital performance. Medicare bases readmission penalties on the care of Medicare patients who were originally hospitalized for one of five conditions—heart attacks, heart failure, pneumonia, chronic lung problems, and elective hip or knee replacements. In 2015, the fourth year of the program, 2,592 hospitals were penalized due to high rates of readmissions. Overall, hospitals were penalized a total of $420 million last year.

Socioeconomics

Under current reimbursement rules, Christian Hospital is expecting to lose $600,000 in reimbursement due to what CMS deems “excessive readmissions.” However, the hospital believes the reimbursement penalty is improper because the formula used to derive the $600,000 figure does not factor in relevant socioeconomic disadvantages of certain patients. For example, the hospital believes that high numbers of patients with low-incomes, poor health habits, and chronic illnesses increased its readmission numbers. If CMS used readmission criteria that factored in those socioeconomic factors, Christian Hospital says its HRRP penalty would have been $140,000.

Missouri Hospital Association

The Missouri Hospital Association is putting its support behind Christian Hospital. The organization revamped its consumer-focused website, Focus on Hospitals, to include readmissions statistics that conform to the methodology Christian Hospital is asking CMS to use. The Focus on Hospitals website adjusts hospital readmission statistics in accordance with patients’ Medicaid status and neighborhood poverty rates. In support of its readmission statistic methodology, the hospital association says there is research that suggests “poverty and other community factors” increase the likelihood readmission to a hospital. The alternative data arises from a study commissioned by the Missouri Hospital Association. That study found that hospital readmission rates improved by between 44 and 88 percent when patients’ poverty levels were factored in.

Legislation

In addition to avoiding penalties, together with the Missouri Hospital Association, Christian Hospital is hoping that its efforts will lead to changes in Medicare law. Specifically, Christina Hospital is seeking the kind of change envisioned by a piece of legislation known as “The Helping Hospitals Improve Patient Care Act.” The bill would alter the way socioeconomic status is considered under the HRRP. Specifically, the legislation would require a transitional risk-adjustment methodology to serve as a proxy of socio-economic status until a more refined methodology can be developed.

Balance

The concerns over the methodology echo similar complaints that hospitals have made about Medicare’s five-star rating system. Whether the issue is readmissions or ratings, interests are in conflict—CMS struggles to find a way to incentivize quality care while hospitals worry that they may be unfairly punished or penalized for treating certain populations. From the perspective of Christian Hospital in Missouri, the current balance is unfavorable. But the question isn’t whether someone should be held accountable for unnecessary readmissions. The question is whether the scales are tipped unfairly.